"We need to give in on price, but for which products and how much?"
Pricing insights, July 2009
Welcome to the second edition of the quarterly Pricing newsletter published by Deloitte. For several years Deloitte has built a profound experience in Pricing. The increased interest in Pricing only confirms the importance of this discipline on business success. The purpose of this newsletter is to share some of our insights and experiences on specific topics related to Pricing. Enjoy reading
In the first issue we shared some tactics on how to defend price levels in current difficult economic times. We stressed the importance to avoid price cuts as much as possible, as it will be hard to regain the lost margin when the market recovers. In the current economic conditions there will however be situations in which you will have no choice but to give in on your prices. In this second newsletter we will discuss how to deal with these situations and how to determine the most appropriate price cuts. Companies often respond impulsively to extreme downward price pressure. Simple, uniform price reduction strategies are employed, without carefully assessing the impact on profitability. As a result, these measures appear to have a far greater effect on the bottom-line than expected. To prevent such surprises, companies could better pursue sharp and targeted price actions, and prepare their customers with carefully planned communications.